Small California Pot Farmers Struggle to Survive, Worry that Central Coast Growers are Using Loophole to Skirt Size Restrictions - NBC Bay Area
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Small California Pot Farmers Struggle to Survive, Worry that Central Coast Growers are Using Loophole to Skirt Size Restrictions

Small pot farmers in California’s Emerald Triangle say it's yet another reason why life in the regulated market is tough

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    Central Coast Pot Growers Use Loophole to Skirt Restrictions

    Northern California pot farmers spent decades turning the Emerald Triangle into the cannabis industry’s most rock-solid brand. But just six months into California’s legal weed foray, it’s clear that growers and governments along the state’s Central Coast are making an aggressive push to crown themselves the new pot powerhouse. According to data from the California Department of Food and Agriculture, many of those Central Coast cultivators are taking advantage of a regulatory loophole that small farmers -- mostly in the Emerald Triangle -- say could lead to a big business takeover of the industry. Investigative Reporter Liz Wagner reports in a story that first aired on June 25, 2018.

    (Published Monday, June 25, 2018)

    Northern California pot farmers spent decades turning the Emerald Triangle into the cannabis industry’s most rock-solid brand. But just six months into California’s legal weed foray, it’s clear that growers and governments along the state’s Central Coast are making an aggressive push to crown themselves a new pot powerhouse. According to data from the California Department of Food and Agriculture, many of those Central Coast cultivators are taking advantage of a regulatory loophole that small farmers – mostly in the Emerald Triangle – say could lead to a big business takeover of the industry.

    California isn’t issuing any large cultivation licenses, which allow grows larger than one acre, until 2023. The idea was to allow smaller growers to gain a foothold in the industry before competing against mega grows. But the California Growers Association is now suing the California Department of Food and Agriculture over the agency’s decision to allow growers to “stack” an unlimited number of small cultivation licenses, leading to potentially massive grows in cities and counties that don't set their own restrictions.

    And early cannabis cultivation license data analyzed by NBC Bay Area’s Investigative Unit shows that’s exactly what’s happening. 

    Emerald Triangle vs. Central Coast

    As strange as it may sound to longtime California residents, as of June 11, Santa Barbara County, not Humboldt County, leads California in state-issued cultivation licenses. Santa Barbara growers hold 1,146 temporary cultivation licenses, or 30 percent of the 3,793 cultivation licenses California has issued so far. Humboldt County growers, by comparison, have obtained just 702 licenses.

    The most interesting revelation in the data, though, is not that Santa Barbara has the most licenses, but that on average, each Santa Barbara cultivator controls dramatically more licenses than their Northern California competitors. And the difference is not even close.

    In fact, nine of the 10 largest cultivation license holders in California are all growing in Santa Barbara County. Those 10 growers hold more licenses than the next 50 largest legal growers combined. Of the businesses in the state's database, the average Santa Barbara grower has about 12 cultivation licenses. In Humboldt County, the average grower has just two. 

    One Santa Barbara company has stacked 200 cultivation licenses, enough to grow on about 46 acres of land. By comparison, the largest license holder in Humboldt County holds just 26 licenses, according to state data.

    NBC Bay Area requested interviews with the California Department of Food and Agriculture to discuss this issue, but the agency declined, citing the pending litigation. But the numbers themselves tell an interesting story.

    The chart below shows how many temporary cultivation licenses have been issued to growers in each California county, and how many businesses control those licenses.

    The Small Farmer

    Johanna Mortz, co-founder of Mendocino County’s PolyKulture Cannyard, considers herself to be among the smallest of small farmers forging ahead in California’s legal weed market. She grows on less than a quarter acre of land, but hopes what she lacks in quantity is outweighed by the quality of the cannabis she grows.

    “We have something very special in this region and I hope we are able to preserve it and amplify it,” Mortz said.

    Cannabis grower Johanna Mortz, co-founder of PolyKulture Cannyard, at her small Mendocino County farm.
    Photo credit: NBC Bay Area

    But life under the state’s new regulation can be stressful for small pot farmers.

    “We have gotten outside jobs in order to make this small farm stay alive,” Mortz said. “Because with what we’re currently getting on the marketplace and with coming into compliance and everything, there is no way that we could afford to continue to do what we love doing without taking on other incomes.”

    The challenges for Mortz and other small growers around Northern California are many. Bringing land into compliance with a litany of state and local regulations can be costly, particularly for growers in the hills of Humboldt and Mendocino. Many of those properties are difficult to bring up to code. For many, it can cost tens-of-thousands of dollars to make the necessary changes. For others, it can cost even more, or is simply not possible.

    Mortz said preserving those small farmers, though, is critical for consumers who want a top shelf product grown with care.

    “The same thing that happened to our agriculture with large scale ag is real,” she said. “It’s going to happen [to cannabis]. It is happening.”

    On top of the compliance challenges, it’s nearly impossible for small farmers to get a small business loan from a traditional bank because marijuana is still illegal under federal law. Mainstream banks just won’t touch the money. It’s partially why coming into compliance with new regulations is cost prohibitive for many small growers who aren’t backed by deep-pocketed investors. For those who can’t make it work, some will work for other marijuana businesses, others will leave the industry altogether, and thousands more will likely risk growing on the illicit market and sell to out-of-state buyers.

    Sam Jacobszoon, water quality team lead at Jacobszoon and Associates, a land management consulting company, is often the one who has to break the news to small farmers that their property has too many challenges to be dealt with.

    “A lot of people, they didn’t realize how much work they had on the property,” Jacobszoon said. His company used to mainly do consulting work for forestry companies, but now his phone rings constantly from cannabis growers looking for help. “They start the enrollment process and realize that they are just not going to be able to fix the property.”

    Land management consultant Sam Jacobszoon says his phone is ringing off the hook from small pot farmers trying to navigate local and state regulations.
    Photo credit: NBC Bay Area

    While some farmers can afford to buy a new piece of land that’s easier to get permitted, perhaps on the valley floor instead of the hills, Jacobszoon fears many of the small farmers who helped prop up the Emerald Triangle economy for decades may vanish.

    “What was always said was this policy was crafted to help the small farmers transition so they could have a piece of the market,” he said. “The things that are unfolding, it doesn’t seem like that was the real intention. In actual practice, it seems like the small farmer is being pushed out.”

    Hover over each county on the map below to see how many growers have obtained cultivation licenses in each county, and how many of those businesses have five licenses or more.


    New Competition

    Down the Central Coast, from Monterey to Santa Barbara, there’s an aggressive push to build a thriving cannabis industry in an area better known for growing produce than pot.

    King City Mayor Mike LeBarre says he wants to turn his small Monterey County town into the Silicon Valley of cannabis. The city has attracted 40 new marijuana companies since voters approved Prop 64, LeBarre said. He expects those new businesses to bring more than 1,000 new jobs and $6.5 million of annual revenue to the city. For King City, an additional $6.5 million means doubling its current annual revenue.

    LeBarre said King City is specifically targeting people who understand business and can navigate the regulations.

    “We were trying to attract people who understood how highly regulated it would be,” LeBarre said. “They are good people who want to be part of the community.”

    The mayor of King City says he's trying to turn the small Monterey County town into the Silicon Valley of pot.
    Photo credit: NBC Bay Area

    A few miles away from City Hall, political strategist Brandon Gesicki points out vacant lots that will soon be filled with marijuana greenhouses and manufacturing facilities.

    He’s new to the cannabis industry, but sees plenty of opportunity. Gesicki created King City Cultivation with several well-connected partners. They’re leasing 15 acres of land to clients in an industrial park specifically zoned for marijuana. He’s the kind of new player that longtime pot farmers fear will put them out of business.

    Gesicki says there’s room for the small farmer in the industry, but says California needs cannabis companies that have business savvy and can produce at a high level. Larger, investor-backed companies are what's coming, he said.

    “The folks that are coming here are some of the top in the industry and folks who want to make a difference in the industry,” Gesicki said. “Yeah, they are going to make a lot of money, but they also want to make a difference.”

    Although Gesicki himself is a new player in the pot world, he says companies like his are able to lure top talent.

    “You’re going to have some brand names out here and some new brand names that are amazing, that are spending a lot of money on talented people, on amazing research,” he said.

    It's still too early to tell what California's cannabis industry will look like when the dust settles. For now, it’s a time of significant transition, with established businesses trying to hang on, new businesses trying to grab opportunity, and state and local regulators figuring out how to police it all.

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